Salesforce
stock is edging lower Monday after Morgan Stanley analyst Keith Weiss downgraded the cloud-based software giant to Equal Weight from Overweight.
Despite the downgrade, Weiss lifted his target price on Salesforce (ticker: CRM) stock to $278 form $251, reflecting focus on 2025 results rather than 2024, and incorporating higher estimates from recent product price increases.
Salesforce shares on Monday are 1.2% lower at $222.81.
Weiss sees few near-term catalysts for Salesforce shares. The analyst notes that the stock has sharply outperformed in recent months, with the stock up about 68% for the year to date. Weiss observes that the gains have been driven by a combination of margin expansion, prodding from activist investors, price increases and announcements of generative AI software plans.
But he adds that with those catalysts behind the company now, “ the path to shares working higher from here becomes increasingly centered on showing upside to growth expectations.” But he adds that improving core demand will take time to be reflected in results given the company’s subscription model, and he says that investors will need to be patient to see clear benefits to revenue growth from its push into generative AI.
Weiss adds that the company’s earnings multiple is “undemanding” at 20 times his calendar 2025 forecast, below the 26 times multiple for the average large-cap software company. But he adds that “incremental catalysts to support a re-rating of the multiple will take time to play out.”
Write to Eric J. Savitz at [email protected]
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